* Reuters base metals poll: https://tmsnrt.rs/3oiX4yW
LONDON, Oct 23 (Reuters) - This year's London Metal Exchange
(LME) Week has been a virtual affair of webinars and Zoom calls
but the buzz of bullish excitement around copper has been very
Nickel won the LME Week beauty parade for the past two years
as the market collectively reassessed the role of the stainless
steel component in electric vehicle (EV) batteries.
That electric tingle is still there, as it is with other
battery metals such as cobalt and lithium.
But it was copper that lit up the virtual space this time
around thanks to the market's current bullish optics and a
future narrative of green infrastructure, with copper wiring at
The two metals also topped this week's Reuters poll of
metals analysts in terms of price expectations for next year.
All LME metals are seen recovering from this year's COVID-19
demand collapse but large supply surpluses are expected to cap
the upside for the likes of aluminium and zinc.
One word of warning for metals bulls, however.
Analysts' median forecasts for 2021 are all below current
cash prices with the single exception of under-performing lead.
The good news may already be baked into prices after their
stellar bounce from the depths of lockdown.
Even assuming the pandemic can be controlled in the months
ahead, recovery outside China could be, to quote research house
CRU's chief economist Jumana Saleheen, "a long, hard slog".
COPPER'S GREEN CREDENTIALS
"Our pick is copper," Citi's Max Layton told the LME's
virtual seminar on Monday.
"I do think it's a stand-out across the complex not just
because it's topical (but also because) it's the one that has
the highest probability of (supply) deficits," he said.
Other panellists agreed and so does just about every other
analyst, judging by the latest Reuters poll. A median forecast
for a cash price of $6,800 per tonne next year represents a
12.5% rise from an expected average of $6,043 this year.
Analysts are rapidly revising their copper demand
projections as they factor in green stimulus packages in China,
Europe and, if Joe Biden wins the presidential election, the
Whichever way you view the global drive to decarbonise,
whether through the prism of electric vehicles, renewable energy
or smart power grids, it translates into more copper wiring.
Copper's new green credentials are being reinforced by
robust current market dynamics as China soaks up the rest of the
world's excess metal.
The International Copper Study Group is forecasting a global
market deficit this year, largely due to the statistical quirks
of how China's huge imports are counted. A significant portion
may be going into invisible inventories in mainland China, but
the effect is still to drain Western surplus.
EV METALS TAKE BACK SEAT
Nickel will register the second strongest price performance
next year relative to this with a median forecast of $15,157 per
tonne, according to the Reuters poll.
The electric vehicle buzz around nickel hasn't gone away but
there seems to be an acceptance that, for now, battery demand is
still dwarfed by the metal's usage in stainless steel.
The EV narrative remains in its infancy and "some caution is
in order for the EV price impact on nickel", Ed Meir,
commodities consultant to ED&F Man, told the LME seminar.
For now nickel's old-economy metrics rule and that will
translate into supply surpluses of 117,000 tonnes and 68,000
tonnes this year and next respectively, according to the
International Nickel Study Group.
It's noticeable that other battery metals such as lithium
and cobalt took a back seat at this year's collective metals
Previous exuberance has been dissipated by a year of weak
demand, oversupply and sluggish prices.
The EV story may have stalled but it is likely to roar back
into life over the coming year as ever more countries put
electrification at the heart of their economic recovery plans.
New battery metals will "soar" over the next four years,
while "traditional metals" will be "relatively flat", according
to CRU analysts, speaking at the company's "Virtual Breakfast"
Expectations for the rest of the LME metals pack are more
subdued with long COVID-19 symptoms in the form of high
The global aluminium market will register a supply surplus
of over 3 million tonnes this year and inventories are climbing
back towards the elevated levels seen in the wake of the global
financial crisis, Eoin Dinsmore, CRU's aluminium research
manager, told the LME seminar.
Equally negative is the fact that China's smelters are in
the process of ramping up production again.
Meanwhile, the cumulative zinc market surplus this year and
next could be in excess of 1 million tonnes, according to the
International Lead and Zinc Study Group. The lead market surplus
could reach almost half a million tonnes.
Lead is now the laggard of the LME complex and the lack of a
"longer-term buzz factor" leaves it "the pariah for base metals
investors". Such was the downbeat assessment from Tom Mulqueen,
head of research at AMT, also speaking at the LME seminar.
The all-important context for this year's LME Week forecasts
was the disembodied nature of what is normally a jamboree of
cocktail parties, dinners and late-night clubbing.
The pandemic remains the most important of all metal
fundamentals. As the U.S. Federal Reserve noted back in July,
the path of economy recovery will depend on the course of the
China's rebound has been extraordinary but recovery
everywhere else is still very much work in progress.
There is significant potential for permanent economic
scarring in the rest of the world's manufacturing sector.
CRU warned that demand for some metals may not return to
pre-pandemic levels until 2022 or 2023 and even that gloomy
outlook assumes that the road to recovery can be maintained
through a second wave of infection.
The future for industrial metals is undoubtedly bright as
green stimulus revitalises traditional demand drivers.
But the fact that most analysts are forecasting average
prices next year below current levels should tell you that it
could indeed be a long, hard slog before the sunny uplands.
(Editing by David Clarke)